On November 14, the PTC/USER Board of Directors met at PTC headquarters with CEO Dick Harrison, Chief Technology Officer Jim Heppelmann, and several other executives and high-ranking staff. This annual meeting is an important opportunity for the Board to track progress on key issues such as quality and customer satisfaction, and provide feedback to PTC on its strategic plans. Establishing a dialog with PTC’s Executive team helps ensure that the voice of the Customer is heard at the highest levels of the Company.

The Board also presented to PTC a series of questions posed by customers through an open solicitation conducted over the PTC/USER e-mail exploder. This was the first time that we asked for community input in such a direct way and it was extremely successful. Due to the volume of the questions received, it is impossible to answer all queries, but we have summarized many of the questions and responses in a separate article.

Corporate Initiatives

2002 has been a year of tremendous change in the face of a challenging economic environment. PTC has been progressing on many fronts that not only address outstanding issues, but also position the company to deliver value to customers over the longer term.

“Product First.” One of the signal changes at PTC is the refinement of its product vision and strategies, represented by what is now known as Product First. The message of Product First is that companies are known by their products, and can grow by focusing on improving products and product development processes. PTC wants to re-empower engineering so that product development is once again the engine of manufacturing companies. Product First asserts that engineering is not a “cost center”, but a key to company differentiation and growth. As Jim Heppelmann stated, “Supply chain optimization can reduce company expenses but it is great products that entice new customers.”

In developing the Product First vision, PTC assembled a strategic team comprised of PTC executives along with the Boston Consulting Group, and charged them with the task of answering the question, “How do companies create value?” From this core concept, the team laid out a Product First roadmap that can be used as a guide to identify focus areas for product improvements.

Companies create value by improving either the top line (revenue growth) or the bottom line (increased profitability). PTC has identified nine opportunities for enhancing value:

• Growing share with customer-focused products;
• Protecting product position;
• Improving ability to fulfill demand;
• Designing for ongoing revenue streams;
• Developing and defining new markets;
• Designing to realize a price premium;
• Lower product cost;
• Lower development & lifecycle cost; and
• Improve asset utilization.

The roadmap shows how these opportunities can be addressed through twenty Executing Strategies, which themselves translate into over 100 explicit Business Initiatives. The Business Initiatives can be categorized into seven major areas:

• Improving product quality;
• Reducing time to market;
• Reducing total product cost;
• Improving information exchange;
• Standardize/modularize products;
• Increase product customization; and
• Increase product predictability.

By using the roadmap, companies can identify the areas which they must address in order to effect improvement. The roadmap helps companies understand the tools, technologies and processes required to help it achieve its improvement goals.

It appears that PTC has embraced Product First. PTC sees itself as a product company and no longer simply a sales company. Over the past several months it seems that PTC has refocused efforts on product development and product quality. We hope PTC will build “great products” that in turn, will help customers to do the same.

For more information on Product First and the roadmap, please visit www.ptc.com/company/tl/ at the PTC website.

Quality. Over the past twelve months, the PTC/USER Board has been very proactive in campaigning for an increased emphasis on delivering reliable, high-quality software. Based on guidance from PTC/USER, PTC has implemented a number of metrics to monitor the quality of their software in development. PTC has spent in excess of $100 million on the development of Wildfire. Nearly 4 million lines of code have been added, requiring PTC to fully embrace appropriate processes and metrics to measure progress and ensure quality. Dick Harrison has been repeating to customers and employees the message that Wildfire will not be shipped until the quality goals are met. Due to this focus on quality, the cycle time for Wildfire is longer than any previous release.

PTC is deploying a pre-production release to allow customers to assess readiness, for PTC software partners to complete integration, and for PTC R&D to complete deliverables. Users can request a copy of the software at www.ptc.com/cgi/cs/apps/req_preprod/wildfire.pl. One important change from past releases is that PTC is providing technical support during pre-production. Seventeen companies are currently working with PTC on weeklong onsite comprehensive evaluations of the release. An exciting development is that PTC will be leveraging new functionality delivered in Wildfire to perform automatic regression testing on Windchill Solutions. This highlights the tighter integration of Pro/E and Windchill.

After reviewing presentations on the results, the Board now has much greater confidence that the proper methodologies are in place to allow for a high quality software release.

Customer Satisfaction. PTC has been actively asking users what their concerns are with respect to customer satisfaction. They have partnered with Satmetrix, a company that specializes in Web-based surveys, to collect and analyze customer satisfaction data for them. Over 100,000 persons at customer sites worldwide are polled twice annually.

From the analyzed data, PTC has determined that the key improvement areas for the Company are, Relationship management, Product quality and reliability, Buying experience (Post sale follow up) and Technical support. As a measure of PTC’s commitment to improving Customer satisfaction each employee now has Performance goals directly linked to the survey data.

The survey feedback also showed that Product technical documentation was a major user concern. For the Wildfire release PTC is collaborating with a range of authors of third party books to increase the opportunity for users to learn how to use their software. PTC is also committed to improving the quality of its technical documentation and is asking users to provide feedback on the pre-production version of the Wildfire help system.

Many other PTC initiatives, such as the “Care” programs, development of the user area at www.ptc.com, and simplified license management and order processing, were launched to address concerns identified through this survey process.

After each survey cycle customers can receive feedback on how their opinions are affecting current and future operations at PTC. If you would like to participate in the surveys or see the current scorecard, please visit www.ptc.com/company/customers/feedback.htm for more information.

Market Position and Financial Strength. As PTC software plays a crucial role at many customer sites, it is important that PTC itself remains a strong and healthy company. In spite of a downward trend in the overall MCAD market, largely due to a smaller pool of engineers and price deflation, PTC exceeded its published revenue target with $186 million in revenues in the last quarter. This is in stark contrast to their major competitors (Dassault, Autodesk, EDS) who pre-announced that revenues would be below their estimates. Presently MCAD accounts for approximately 75% of the revenues and Windchill accounts for about 25%. PTC continues to exhibit a healthy balance sheet with no debt and well over $200 million cash in the bank. PTC invested 19% of revenues on research and development in the past year. Thus, the outlook is that PTC will remain profitable and will do so without employing the typical tactics favored by Wall Street of slashing employee ranks or robbing the future by cutting back on R&D.